Even if a drug to treat Covid-19 was found quickly, the way back to normality would be a long and rocky one, said portfolio manager Thomas Altmann from the investment advisor QC Partners. “The consequences of the economic lockdown at company level and the rise in the unemployment rate cannot simply be reversed.”
Timo Emden from the analytical company of the same name said something similar. “Investors are longing for the big hit in the corona pandemic,” he said. For the market, however, it is still clear that even an active ingredient is not a panacea for the affected global economy.
The German Leading index Dax climbed to 10,756 points on Friday. By the close of trading, however, he surrendered part of the profits and closed with a gain of almost 3.4 percent at 10,642 points. The development of the EuroStoxx 50 is similar: the European stock market index went out of trading with an increase of 2.7 percent at 2,888 points. In the US, investors were also initially in good spirits on Friday. The Dow Jones ended the year up 2.9 percent at 24,216 points.
Badly hit global economy
Jochen Stanzl, chief market analyst of the broker CMC Markets, compared the current increases in the stock market indices with the situation before the big sell-off in December and January. “Even now soaring technology stocks are driving like Netflix, Amazon and Tesla attention away from the fact that the real economy is in ruins, ”he said. “In the end, these companies will do good business, but they won’t save the global economy.”
Despite all the euphoria, the companies are “facing a major adjustment process, accelerated by the additional costs and burdens from the lockdown,” says Stanzl. At the moment, no one could say what the size of company closures would be in the end and how long it would keep stock exchanges from reaching the old highs.
In view of the relaxation of the contact restrictions, Jörg Krämer, chief economist at Commerzbankthat the economy will pick up strongly in the short term. “In the long term, however, there are considerable dangers – for example, due to the sharply increasing corporate debts caused by the crisis,” he said. A V-shaped upturn, i.e. a very rapid pickup in the economy, is unlikely. Rather, a gradual return to growth can be expected.
The chief economist at Commerzbank expects the economy to pick up strongly in the short term.
In the coming week, the developments around the corona virus and current figures on the economic situation will continue to be the dominant topics on the markets. For example, stock marketers are eagerly awaiting the EU’s virus crisis summit next Thursday. Among other things, there will be a possible inclusion of jointly guaranteed debts to overcome the pandemic consequences.
In addition, shareholders will increasingly look at the quarterly figures of individual companies in the coming week. After companies in other countries have already submitted figures for the first quarter, the balance sheet season is now also beginning in Germany. The kick-off is as usual SAP.
In the current balance sheet season, a total slump in profits of 40 percent can be expected, said Ulrich Stephan, chief investment strategist for private and corporate customers at German bank. Nevertheless, he is optimistic: thanks to the multi-billion dollar aid packages from central banks and governments, investors are looking beyond current developments and are concentrating on profits in the second half of the year and 2021.
Entry into the stock market
Given the current price gains, some investors are wondering whether they have already missed the best opportunity to enter stocks. According to the DZ Bank analysts, the volatility will remain high for the time being due to the continuing uncertainties caused by the corona virus and further price setbacks cannot be ruled out. “From previous stock market cycles, we know that after a recession has bottomed out, the stock market has the highest and most sustained growth rates,” said DZ-Bank. “It will take some time before this low is reached. Our economists see this so far in the second quarter of 2020. “
Looking ahead to the coming years, the DZ Bank analysts expect: “By 2022/23, the Dax companies could earn as much again as in the previous record year 2018, and the Dax could reach its highest level again in 13,800 points in 2024.” Who in the continue to buy shares in the coming quarters, should achieve very good long-term investment results. However, it is important to only have shares in companies in the portfolio whose prospects are viewed positively over a three or five year period.
Altmaier wants to gradually ramp up the economy
This is how it will continue in the coming week:
Monday: At the beginning of the week, quarterly figures of Philips, Vivendi, and IBM expected. In Japan, figures on foreign trade are published in March, in Germany data on producer prices in March. The Bundesbank also publishes its monthly report.
Tuesday: The balance sheet season starts and SAP starts as usual. However, the software company had already published preliminary results in early April and lowered the full-year targets. In addition, Netflix, London Stock Exchange (LSE) and Coke Numbers before. The ZEW index provides information on the mood of German stock exchange professionals. UK unemployment figures come from London.
Wednesday: Preliminary data on consumer confidence in the euro zone are expected from Brussels. Lay at the company Alcoa, Ericsson, Caterpillar, Heineken and Roche first quarter figures.
Thursday: The publication of the GfK index will give an indication of the Germans’ buying mood. Alexander Roose, chief equity investor at asset manager Degroof Petercam, expects consumer confidence to “be severely impacted by the severe recession in the services sector due to rising health care costs and lower purchasing power”. In addition, the preliminary Markit purchasing manager index for the euro zone (industry, service, composite) is published. In the United States, the number of initial jobless claims for the week ending April 18 is published. Among other things, they provide insights into their books Credit Suisse, Volvo, Renault, Unilever and Intel.
Friday: At the end of the week, the Ifo index is on the schedule. It provides information about the mood on the German executive floors. Experts expect another slide to 77.2 points from 86.1 points in the previous month. In the United States, data on orders for durable US goods are also published. Experts expect a drop of 11.4 percent. Quarterly figures come from Sanofi, American Express and Nestle.
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